KRICP: "September 7 Plan Needs Concrete Private Sector Incentives for Short-Term Impact" [Real Estate AtoZ]

"Short-term Construction Targets Require Private Sector Participation"
Most LH Projects Are Contract-Type... Need for Incentives to Attract Participation
Urban Supply Expansion Alone Offers Limited Market Stabilization
Lack of Consideration for Non-Metropolitan and Rental Markets Also Pointed Out
Loan Ban for Rental Business Operators Hinders Securing Private Rental Stock

A state-run research institute has suggested that for the government's September 7 housing supply plan to have a short-term impact, it must present concrete incentives to encourage private construction companies to participate.

Yonhap News Agency

On September 28, the Korea Research Institute for Construction Policy (KRICP) released a report titled "Evaluation and Recommendations for the September 7 Housing Supply Expansion Plan." The report stated, "A substantial increase in supply can be expected," but also emphasized, "Since private sector participation is essential to achieve this, it is necessary to specify incentives for business participation."

The September 7 plan is a large-scale supply initiative to start construction on 1.35 million new homes in the Seoul metropolitan area by 2030. The KRICP pointed out that most of the projects where Korea Land and Housing Corporation (LH) directly develops public land are, in practice, 'contract-type private participation projects.' It stressed that, in order to achieve the short-term construction targets, incentives for private sector participation must be expanded.

The report also assessed that the plan's measures to expand housing supply in urban areas are likely to have only limited short-term effects on market stability. It added that, for the projects to proceed smoothly, solutions to address complaints from landowners, local governments, and community residents must also be considered.

Furthermore, the report pointed out the need to consider non-metropolitan areas and the monthly rental market, which were not addressed in the current plan. The KRICP stressed, "Fundamental measures are needed to resolve polarization in non-metropolitan housing markets, such as linking housing supply to industries and jobs and expanding metropolitan transportation networks."

Additionally, the report noted that the complete ban on mortgage loans for home sales and rental business operators in the metropolitan area, as stipulated in the September 7 plan, could make it difficult to secure private rental housing stock, and called for supplementary measures to address this issue.